As the economy evolves, so does government

I think many of us see "government" as some sort of inherently inefficient black box.  But it does a lot of things and, as the economy evolves, so does government.  We will be talking about equity (fairness) and efficiency throughout this class.  So, is it fair that water costs so much in parts in California (see this link) ?  How do you even begin to answer such a question?  If it is not fair, what should be done?  And by whom?